OnwardLesson 3.5
When real estate comes with the business
Many businesses operate from a building the seller owns. You can lease it, buy it or sometimes buy it later.
The short version
- Many businesses operate from a building the seller owns. You can lease it, buy it or sometimes buy it later.
- Buying the building raises the price, but real estate can be financed over a longer term, which keeps payments lower.
- With SBA financing, you can put the building inside the 7(a) loan or finance it separately with a 504 loan. Since July 4, 2026, the two together can reach $10 million.
- Leasing from the seller keeps your cash and your loan smaller, and makes the seller your landlord.
- Value the building and the business separately. Do not let one hide the price of the other.
Your three options
Lease from the seller. The seller keeps the building and you sign a lease. Your purchase price and loan are smaller. The seller keeps an income and stays tied to the business. Make sure the rent is at market, the term is long enough and you have renewal options. Lenders often want the lease, with renewals, to run at least as long as the loan.
Buy it inside the 7(a) loan. The SBA 7(a) loan can include real estate. The real estate portion can be repaid over up to 25 years, compared with up to 10 for the business. Everything counts against the 7(a) limit of $5 million.
Buy it with a 504 loan. A 504 loan finances owner-occupied real estate and long-life equipment. It is made through a Certified Development Company working alongside a bank. A common structure is about 50 percent from the bank, about 40 percent through the 504 program and about 10 percent from you. Since July 4, 2026, a buyer who secures a 7(a) loan first can also borrow up to $5 million through 504, for up to $10 million in combined SBA financing. The 7(a) pays for the business. The 504 pays for the building.
An illustration
Suppose the business is $2,000,000 and the building is $1,000,000.
| Item | Business | Building |
|---|---|---|
| Financed by | SBA 7(a) loan | SBA 504 loan with a bank |
| Your cash, at about 10 percent | $200,000 | $100,000 |
| Repayment term | Up to 10 years | Up to 25 years |
Keeping the building on its own longer-term loan keeps the annual payment lower than putting everything on a 10-year schedule. It also leaves more of your 7(a) limit for the business.
Value them separately
Ask for separate prices for the business and the building. A business earning $400,000 is worth the same whether or not the building comes with it. The building has its own value, set by a real estate appraiser. Lenders will order an appraisal of the real estate and, for most commercial property, an environmental review.
Rent changes the earnings
If you lease from the seller, check whether the rent the business pays today is at market. If the seller has been charging the business little or nothing, the earnings look better than they will once you pay a fair rent. Adjust SDE before you set your price.
Take this to your own people
The questions for this topic, for your attorney, your accountant or your lender.
- For a lender: "Would you finance the building inside the 7(a) loan or with a 504 loan, and how would each change my payment and my cash?" Listen for: both versions side by side.
- For your M&A attorney: "If I lease from the seller, what lease terms do I need?" Listen for: length, renewal options, rent increases and what happens if the seller sells the building.
- For your CPA: "Is the rent this business pays at market, and how does that change its earnings?" Listen for: an adjusted SDE using a fair rent.
This names the question. Your CPA, your M&A attorney and your lender answer it for your situation.
Figures from the U.S. Small Business Administration, 2026, and SBA SOP 50 10 8.1, effective October 1, 2026. Figures in the illustration are illustrative arithmetic, not an appraisal, a loan offer or a financing opinion.
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